Nature of Proceedings
- in rem (binding to the whole world) → cram down effect
- summary and non adversarial
Yes
Debtors, for FRIA, are insolvent
- natural persons
- juridical persons (sole, partnership, domestic corporation)
Group of Debtors
- financially related corp (parent, subsidiary)
- partnerships (more than 50% owned by same person)
- single proprietorships (owned by same person)
Not Debtors, for FRIA
- banks
- insurance
- pre-need
- government agencies
Insolvency refers to
- technical insolvency (not liquid enough)
- bankruptcy insolvency (liabilities greater than assets)
Yes
Creditors, for FRIA
- natural or juridical person
- has a claim against debtor
- before commencement date
- can be secured or unsecured
Yes
Claim
- whether for money or not
- whether liquidated or not
- whether matured or not
- whether disputed or not
- whether fixed or contingent
includes claims
- of government
- against officers → ICOB
Involuntary Rehabilitation
- initiated by creditor or group of creditor
(1) if there is no genuine issue of fact/law on claims
(2) no payments for at least 60 days (or generally, debtor cannot pay in due date)
(3) creditor has foreclosure proceeding → debtor cannot pay others
Yes
WHO MAY FILE REHABILITATION?
- Voluntary (sole proprietorship, partnership, corporation)
- Involuntary
Voluntary
- Sole - owner / proprietor
- Partnership - majority of partners
- Corporation - majority BOD + 2/3 OCS
Involuntary
- HIGHER → 1M or 25% (SSC or Partner’s Contribution)
Commencement Order
- shall be issued within ? from filing
- retroactive → commencement date = date of filing
- duration → entire duration of the proceedings
within 5 days
Effects of Commencement + Stay Order
Creditor
- cannot collect
- secured creditors → preference is retained (but suspended)
Debtor
- cannot be compelled to pay
- cannot sell, transfer properties (XPN : same in suspension)
Yes
Exceptions to the Stay Order
- cases already pending in the SC, specialized court, quasi-judicial agency
- claims against sureties and other persons solidarily liable with the debtor
- action of customers or clients of a securities market participant (fiduciary)
- actions of licensed broker or dealer to sell pledged securities of a debtor (abono)
- clearing and settlement of financial transactions
- any criminal action against the debtor
Yes
Duties of Rehabilitation Receiver
- preserve value of assets of debtor
- prepare, recommend, implement a rehabilitation plan
Qualification of Rehabilitation Receiver
- RC → resident of PH in the 6 months before nomination
- has knowledge of insolvency and commercial laws
- no conflict of interest
A rehabilitation receiver will be assisted by a creditors’ commitee (liaison only, cannot give consent on behalf of creditors)
Yes
REHABILITATION PLAN
Within 5 days, the court shall notify the creditors
- within ?, creditors may object
- within ?, court must confirm
Cram Down Effect
- rehabilitation plan is binding to all persons
- whether the creditor approved or not the plan
- whether claims have been scheduled or not
- within 20 days
- within 1 year from date of filing (if not → convert to liquidation)
PRE-NEGOTIATED REHABILITATION
Within 5 working days, the court shall issue an order
- within ?, personal delivery of copy to creditors (not petitioner) 10% of total liabilities
- 2 publications → 1st is within 7 days
From 2nd publication
- within ?, creditors may object
- within ?, court must confirm
- within ?, court must set hearing (if with objection)
- within 3 days
From 2nd publication
- within 8 days
- within 10 days → max 120 days from date of filing (if not → deemed approved)
- within 20 to 30 days
COURT-SUPERVISED
The court may
- approve
- deny → debtor is not insolvent, bad faith
- convert to liquidation → rehabilitation is not viable
PRE-NEGOTIATED REHABILITATION
The court may
- approve
- convert to liquidation → bad faith
APPROVE
- Court-supervised → debtor is insolvent AND rehabilitation is viable
- Pre-negotiated → no objection or objection is cured
Standstill Period
- only for out-of-court
- approved by creditors → what percent of total liabilities?
- for how many days?
- 50% of total liabilities (same as court- supervised)
- maximum of 120 days (same as pre-negotiated)
APPROVAL NEEDED
- Court-Supervised
- Pre-Negotiated
- Out-of-Court
Pag 50% → laging more than
COURT SUPERVISED
- court + creditors (more than 50% of total liabilities)
- court only
PRE NEGOTIATED → 50, 50, 2/3
- more than 50% total secured
- more than 50% total unsecured
- 2/3 total liabilities
OUT OF COURT → 67, 75, 85
- 67% total secured
- 75% total unsecured
- 85% total liabilities
Unique Features of Suspension of Payments
- can be availed by juridical persons. True or False?
- can be voluntary or involuntary. True or False?
- only if technical insolvency. True or False?
- amount of liabilities will be affected. True or False?
- number of creditors is immaterial. True or False?
- False → only by individual debtors
- False → only voluntary (filed by debtor)
- True
- False → suspend lang, hindi marereduce or mawawala yung liabilities
- True
Prohibited Acts of Debtor (During Pendency)
- sell, transfer, dispose his property
XPN : those used in ordinary course of business
- make payment
XPN : necessary or legitimate expenses of business
Yes
SUSPENSION ORDER
- creditors cannot do anything.
- what is the validity?
EXCEPTIONS
- within ? before filing → with claims for personal labor, maintenance, expense of last illness and funeral of wife or children of debtor
- secured creditors
- Validity → for 3 months or time it is denied
- Within 60 days
Creditor’s Meeting
- what is the quorum? what is the approval?
NOT ENTITLED TO VOTE
- within 60 days before filing → with claims for personal labor, maintenance, expense of last illness and funeral of wife or children of debtor
- secured creditors
- within ? before filing → creditor with claim incurred
However, if they join → bound by the agreement
- Quorum → creditors holding at least 3/5 of total liabiltiies
- Approval → 2/3 head count, majority vote at least 3/5 of total liabilities
- within 90 days
Unique Features of Liquidation
- can be availed by juridical persons. True or False?
- can be voluntary or involuntary. True or False?
- only if technical insolvency. True or False?
- no minimum amount of debt. True or False?
- True → both individual and juridical debtors
- True
- False → can be technical insolvency or bankruptcy insolvency
- False → debt must be at least 500K
WHO MAY FILE LIQUIDATION?
- Voluntary
- Involuntary
Voluntary
- more than 500K liabilities
Involuntary
- at least 500K liabilities
- if juridical = 3 or more CR → HIGHER 1M or 25% (SSC or Partner’s Contribution)
Voluntary Liquidation vs Involuntary Liquidation
- acts of insolvency need not be alleged → no need for trial
- debtor is not absent
- posting of bond by creditors → not required
bond → to recover damages
Voluntary Liquidation
Involuntary Liquidation
- initiated by creditor or group of creditor
(1) if there is no genuine issue of fact/law on claims
(2) no payments for at least 180 days (or generally, debtor cannot pay in due date)
(3) rehabilitation is not viable
60 days if rehabilitation
-
RA Number10
-
Obligations84
-
Contracts40
-
Sales55
-
Credit Transactions30
-
Partnership40
-
Private Corporation74
-
Securities Regulation Code14
-
Cooperatives46
-
Government Procurement Law20
-
Labor Standards40
-
Intellectual Property Law29
-
FRIA30
-
Anti Money Laundering Act13
-
Social Security Law25
-
Insurance24
-
Lemon Law7
-
Philippine Competition Act11
-
Bank Secrecy Law6
-
Truth in Lending Act2
-
PDIC8
-
Consumer Protection Act10
-
Ease of Doing Business7
-
Anti Bouncing Checks Law5
-
E-Commerce4
-
Data Privacy7
